Williams rescinds no-loan policy

Parents Forum
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<p>According to EphBlog, interim President of Williams College Bill Wagner sent a letter yesterday announcing the roll-back of the school's recent no-loan policy, effective with new students entering in the Fall of 2011. The college hopes to save $2 million a year in financial aid costs by rescinding the no-loan policy.</p>

<p>Williams</a> Ends No-Loans Financial Aid Policy : EphBlog</p>

<p>The college also announced plans for a voluntary early retirement program to shrink the size of the faculty and staff beyond attrition-only.</p>

<p>Finally, the college announced intentions to begin construction of the $100 million library in spring 2012 ("academic year 2011-12").</p>

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<p>I'm a little surprised because the College appeared to weather the recession in very good shape. I see nothing in their financials that couldn't have been accomodated by comprehensive across the board belt-tightening. Certainly other liberal arts colleges are adjusting their budgets without voluntary retirement reductions and elimination of no-loan (although certainly these have been on the table at all schools.</p>

<p>I don't think Willliams has detailed their entire package of cuts, but based on the information they have provided:</p>

<p>1) They have not rescinded the need-blind for internationals policy (cost this year: $6.4 million to enroll 143 internationals).</p>

<p>2) Have only reduced their $6.4 million athletic budget by $200k.</p>

<p>I think the crux of the issue is probably the decision to proceed with the construction of the new library and demolition of the old library (built 35 years ago). This add as much as $3 million to $5 million a year in new debt service that must be offset by other budget cuts.</p>

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<p>It will be interesting to see what impact this has on other schools, all of which are looking to control the growth in financial aid:</p>

<p>Amherst (which has dire liquidity problems) announced last summer an increase in expected summer earnings, trimming financial aid grants by an average of $1,700 per financial aid student.</p>

<p>Swarthmore's board voted in December to keep the no-loan policy in place, but to increase expected summer earnings by an average of $600 per fianancial aid student.</p>

<p>Williams ending no-loan will result in an avg savings of $2,000 per aid student.</p>

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<p>The economy is in the hurt-locker. Something’s got to give. (Seems odd that Williams would be demolishing a building that is only 35 years old, though!)</p>

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<p>No surprise here, many colleges have been whispering about necessary aid changes. I’ve been wondering which college would be the first. Be ready for many to follow.</p>

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<p>What the heck are they doing with that billion dollar endowment?? I don’t get it. Why do they need so much money in the bank? I think these colleges keep their endowments so high for prestige. I understand the idea of needing a strong capital base to fund current and future needs, but why they can’t dip into that endowment is beyond me!!</p>

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I see nothing wrong with a Williams student who is receiving financial aid in taking out a loan of $2000/ year. This will be a Subsidized Stafford Loan which won’t begin repayment until 6 months after graduation. Seems reasonabile to me especially since it’s far below what kids at other college are expected to borrow on their Stafford Loans.</p>

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<p>^^^</p>

<p>Very true…</p>

<p>Williams is giving an avg of $45k to each int’l student. I hope Williams has the means to truly determine the need of those kids. From what I’m hearing, it’s quite easy for students from several countries to hide money/assets from these colleges.</p>

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<p>Read the article about Harvard’s financial problems on this board. The question really is, what have they already done with their endowments?</p>

<p>These colleges have serious cash flow issues and they have to make significant cuts somewhere.</p>

<p>These kids will still graduate far less in debt than kids attending their state U.</p>

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<p>sdon:</p>

<p>I’m not aware of any college or university that is not dipping into its endowment every year. Even the most conservatively mananged schools allocate 4.0% to 4.25% of the total endowment value to spending each year. Average would be a 5% target. Many schools spend 6%, which is viewed as spending down the endowment and is considered unsustainable.</p>

<p>Most schools are upping their short term endowment spending rates (whether they want to or not). The budget cutting efforts are three to ten year plans to bring that spending rate back down to sustainable 5% rates. </p>

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<p>Schools that started at the low end of the spending scale have a cushion. For example, say your school was spending 4% of a $1 billion endowment ($40 million annual endowment spending). The endowment has now shrunk to $800,000. That means they can now spend $32 million a year and will need to find $8 million in cuts over time. If, however, they increase endowment spending to 5% a year for the time being, they are back to $40 million a year spending and the only immediate cuts required are those necessary to offset structural spending increases (energy prices, health care costs, financial aid, etc.). Over time, that school would like to get back down to 4% spending, but they have the luxury of phasing in some cuts. A school that started with a 6% spending rate doesn’t have any cushion.</p>

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<p>This is truly sad to me.</p>

<p>The no loan policies were very generous and I understand the bottom line finances. I am saddened beyond the financial aspect - the No Loan policies sent a moral message that the higher learning system should not be limited to certain income brackets nor should the system stiffle the student’s future with high debt.</p>

<p>I do not think $2,000 is too much debt, however this amount is an <em>average</em> – If the policy were changed to limited each student to a set limit then the “spirit” of the no loan policy could continue. In absence of that, I just find the change does not sit well with me. </p>

<p>How many students care about the library?</p>

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<p>hmom:</p>

<p>Williams does not have the liquidity problems that Harvard (and Amherst) are facing. Their debt is reasonable. There cash calls are reasonable. The investment mix is such that they have experienced no liquidity problems at all. The only issue they’ve got is variable rate debt that is actually a short term plus (low rates), but carries some future risk as inflation sets in post-recovery. Williams only issue is bringing spending down in line with the new endowment levels. They don’t have to cut financial aid and faculty as long as they are willing to make broad across the board cuts.</p>

<p>justamom:</p>

<p>The interesting thing about college budgeting now being a zero-sum game is that we get to see the priorities of each school laid bare. It’s all right there in black and white. Did they cut “this” or “that”?</p>

<p>mom2:</p>

<p>I really thought Williams would cut need-blind for internationals first. Unlike no-loan, there are only two LACs touting need-blind for intls and Williams is spending a fortune on intl aid to enroll 143 students. Simply going to the same mix of aid versus non-aid as the for domestic students (about 50-50) would save Williams on the order of $2 to $3 million a year in fianancial aid costs. Likewise, they are spending $2, $3, $4 million a year more than most high-end LACs on their athletic programs. I would like to see some real cuts in that budget before financial aid gets whacked.</p>

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<p>The real concern should focus on Williams’ institutional method that will be used to determine financial need. Even schools with no loan policies can result in substantial non-subsidized loans for both the student & parents.</p>

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<p>longhaul:</p>

<p>In fairness, it’s no secret in higher education that the no-loan policies were targeted at wealthier families. At a high-class joint like Williams, the low income students (say below $40,000 a year income) were already no-loan. So the craze to go “no loan” was really targeted at higher income financial aid students, whose family incomes can reach as high as $200,000 a year. In fact, a $200,000 a year financial aid student was probably getting the loans and not much else in their fianancial aid package. So converting $3000 a year in loans to a tuition discount was a lot like a stealth merit aid discount.</p>

<p>Facutly committees have been pushing hard to end no-loan, asking why they should sacrifice when families making $200,000 are getting no-loan financial aid. I know that the faculty made this argument at Swarthmore. Williams’ governance structure is such that the faculty has near complete control. So, it is perhaps not surprising that they picked this cost-savings over something else.</p>

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<p>One important factor to consider when looking at endowments, spend downs and college budgets: How much does the college rely on endowment money for operations? In the case of USC, which also suffered endowment losses close to 30%, the operating budget relies much less on the endowment funds that similar universities. Thus, I am told (my H is on math faculty) that USC is now settling their sights on capturing UC faculty members who are ready to jettison the problems found there. University of Stolen Colleagues.</p>

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<p>Northwestern University also does NOT rely heavily on endowment funds for operating expenses.</p>

<p>Post #12: Although I understand your argument, I am not sure that families with incomes up to $200,000 per year are receiving aid without having multiple children in private schools simultaneously in which case financial aid may be necessary & warranted.</p>

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<p>Interesteddad, you’ve certainly done your homework!</p>

<p>As you say, all of these schools need to make broad cuts. They need to make them in a way that makes them remain competitive with their peer schools. I think that’s why one of the things Williams targeted was the no loan policy, because I they know peer schools will do the same thing.</p>

<p>They also don’t need to announce anything if they choose to support fewer internationals this year. Their admissions office will simply be told to value internationals with certain qualities that imply affluence.</p>

<p>Larry Summers, in his idealistic view of what top colleges should be (not knocking the view, just the reality given cycles) drove these schools to go too far in terms of who they were supporting at the levels they were supporting them. It was simply unsustainable.</p>

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<p>I do think that the impact of no-loans policies on middle-class families is overlooked. Some schools cap no-loans at 75k or 80k a year… so families making AGI 85k or 90k a year, which is still pretty middle-class, would see a not-insignificant 3k/year savings at no-loans schools vs. even capped-loans school.</p>

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<p>Okay. So, what is wrong with ending the free lunch? Maybe it’s better that some kids be expected to borrow a little bit than to cut an English position, or reduce library hours or both.
I would be happy for my own daughter’s financial aid package to be Costs = EFC + federal loans + merit + grants.
but it is not. we have to add in a big “y” factor.
Any kid who is lucky enough to attend a college where Costs = EFC + sub federal loans + grants is doing well.</p>

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<p>I-dad, I also thought that Williams would cut need-blind for internationals first. In fact, as unpopular as this might be with our overseas friends, and unless Williams has DEDICATED endowments funded by international alumni that cannot be used for other purposes, the first budget line Williams (and all other schools) should amend is the international aid. It is one thing to see diversity (a very good thing) and seek to admit and enroll international students, it is quite another to feel necessary to extend need-blind admissions to internationals, let alone offer them grants. I see no reason why foreign financial should be composed of 100% loans. If the students fail to repay after returning to their country, the school would not worse off. If the students decide to overstay their visas, they would face an obligation to repay their schools. Generous formulas to replace repayment could be developed through organizations or the US government. We spend a fortune in sending experts to foreign countries, why not extract foreign service from the students our schools educated. In a nutshell, anything is better than a straight grant based on a need-blind admission. </p>

<p>Although it sounds trivial to some, changes introduced by Amherst that include raising the summer earning expectations can and do create great issues for the most disadvantaged students. It makes little sense to reverse policies that help low-income domestic students AND middle-income domestic families while maintaining entirely misguided policies of offering grants to internationals at a time when the citizens of this country are in dire need. </p>

<p>Of course, Williams and other private schools are entitled to spend their riches as whimsically as they wish. However, as they do not appear to be swimming in extra cash, they should use better judgment in allocating their resources and generosity. Perhaps, the people who make such questionable decisions should leave their bucolic and pastoral environments every once in a while. If Wiiliamstown does not offer much an inner-city, they would not have to travel far from finding many urban areas that need all the help they can get.</p>

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<p>I agree. In theory. However, as we well know, there can be a big gap between what the college thinks a family’s EFC is and what the family thinks it can pay. Many kids who may not have had a loan as part of their official package were still taking out loans to cover their EFC. For them, this policy change will be painful.</p>

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<p>In this economy, I’d term it in much stronger language…instead of “great issues”, perhaps great “hardship”. Expecting “liberal arts” majors to find a job when they return to the inner city/hood is naive at best – something only those in an Ivory Tower would think logical.</p>